You have many options for how you can eliminate your debt. Some options have more advantages than others – such as using debt consolidation, bankruptcy, doing nothing, or negotiating with creditors yourself. This blog guide goes into detail on how you might discharge debt.
Why not debt consolidation?
Debt consolidation, where all your debts are paid on and you make payments over time, has too many disadvantages to count. True, filing bankruptcy is not always your best option, but it’s much better than debt consolidation. If bankruptcy isn’t for you, there is no point in debt consolidation. You often end up paying more than the original debt because of interest rates. If you negotiated the debts yourself – by calling creditors and setting up payment plans – you stand to save more money and cut down on fees.
Doing Nothing
When overwhelmed by debts, you have legal options in Texas. While “doing nothing” may sound odd, it’s actually a tool you can sometimes, if rarely, use. You decide to pay on no debts, to take no legal action, to let the creditors call, to let them take what assets you have. When is this a bad decision? When you have something to lose. If you are living with a friend or family, if you have little to no assets and little income coming in, “doing nothing” may work. But be warned: unless you have thick skin and feel no stress, you may want another option.
Negotiating with Creditors Yourself
Instead of doing nothing or using debt consolidation, most Texas financial experts advise you to consider negotiating with creditors or choosing a form of bankruptcy. There is no law against negotiating creditors yourself – asking for lower interest rates, more time to catch up, and sometimes lower payments. Why would creditors want this? If you file bankruptcy, they often get nothing. If you can pay them even some of the money, it works out for them.
Why file Texas bankruptcy?
Bankruptcy is not for everyone. Some file bankruptcy for the wrong reasons. The right reasons? Impossible debts you simply cannot pay in a manageable amount of time, usually 3-5 years, or for legal protection when property and assets such as a home and car are in danger of being taken.
You have options in bankruptcy, Chapter 7 or Chapter 13. You can save on unsecured debts, debts on credit cards and to hospitals for examples, with Chapter 7. It discharges the debt, and only certain debts like taxes, alimony, student loans, and child support cannot be discharged.
If you had to choose between a Chapter 13 bankruptcy and debt consolidation, always choose Chapter 13. Chapter 13 protects your home and lets you pay on secured debts; debt consolidation can do little to help with secured debts such as your home and car. You might as well either negotiate or file for bankruptcy help.
Is Bankruptcy always best?
No, and this should be clear: you have options beyond bankruptcy. It’s just that many Texas residents believe they’ll lose more than they gain. Almost always, a successful bankruptcy saves you money. But if you have only minor debts – monies owed you can pay in 1 year or less – bankruptcy may not be the best solution.
